Environmental technology concept. Sustainable development goals

Understanding REGOs: Do you know where your renewable energy is coming from?

Environmental technology concept. Sustainable development goals

Understanding REGOs: Do you know where your renewable energy is coming from?

August 31, 2021

One of the key drivers for the UK to reach net-zero is the continued development of renewable energy projects to supply clean power to the grid and reduce carbon intensity. These projects can be powered by different energy solutions, including wind, wave, marine, hydro, biomass, or solar.

The recent report by the Intergovernmental Panel on Climate Change (IPCC) highlighted the urgent need for the world to transition away from fossil fuels to renewable energy. As this focus on reaching net-zero intensifies, particularly in the run-up to the key UN climate conference, COP26, we look at the role of the Renewable Energy Guarantees of Origin scheme (REGOs). This government scheme, which was established to support the energy transition away from fossil fuels, provides transparency about the proportion of electricity suppliers source from renewable generation.

The REGO scheme is part of the EU’s Renewable Energy Directive, which requires all EU Member States to report what proportion of electricity consumption is from renewable sources. Following Brexit, the REGO scheme is under review in the UK. However, it appears it is the Government’s intention for the scheme to continue. The UK is now in a position where it can review this scheme and decide on a future approach that could expedite the journey to net-zero whilst improving transparency.

Currently, the scheme works by granting one REGO certificate to a renewable generator for every megawatt-hour (MWh) of renewable electricity produced. Energy suppliers must purchase and “retire” REGO certificates as part of their Fuel Mix Disclosure Regulatory requirements, therefore evidencing to end consumers the proportion of power produced from various fuels (renewables, coal, gas, nuclear, etc.).

REGOs can be sold separately to the power with which they are associated. Suppliers often purchase these REGOs without the associated power generation to ‘green’ their fossil fuel-based supply. This means the certificates don’t necessarily support or incentivise the development of new renewable projects, or “additional” projects, often referred to as additionality.

Additionality is becoming increasingly important to customers. It enables them to clearly demonstrate that they are actively involved with a new renewable project, rather than just buying REGOs from an existing project. This is often achieved through a Power Purchase Agreement (PPA).

A customer will guarantee to purchase the power at an agreed price for an agreed length of time and receive the REGOs attached to that power through a PPA. This provides a level of certainty to the developer/investor of the renewable project to build it. The customer can claim the REGOs attached to this specific project and state that they are “additional REGOs”. It also has the benefit that a proportion of the customers’ electricity consumption will be fixed for the long term, which is usually more cost-effective than current energy market prices and also protects against rising electricity costs.

If an organisation is making a true commitment to zero carbon emissions like “Microsoft’s 100/100/0 vision and commitment for a decarbonized grid”, then REGOs are likely to play a smaller part. To truly operate with carbon neutrality 24/7, renewable technologies will need to be paired with energy storage and state-of-the-art energy optimisation to match supply and demand in real-time.

At Hartree Solutions, we can guide you through a net-zero strategy, signposting the best technologies to reduce your carbon from day one. We also have several options to help you access “additional” REGOs with both on-site and off-site solar. Additionally, for hard to abate emissions we can provide verified carbon offsets to set you on the right path from day one as part of your journey to net zero.

written by
Matthew Van Staden

More market insights

Araucaria forest Nequen province Argentine Patagonia

Hartree Partners and ecosecurities launch Project Araucaria to generate $1.5bn to support habitat restoration across Latin America

The project will work with local farmers, landowners, cooperatives, and NGOs in Argentina, Chile, Paraguay…

  • The project will work with local farmers, landowners, cooperatives, and NGOs in Argentina, Chile, Paraguay and Uruguay
  • The project will help design, finance, and develop nature-based carbon reduction and removal projects, aiming to achieve the highest level of accreditation
  • The project targets the creation of over 300 million tonnes of voluntary carbon credits over 30 years

Hartree Partners and ecosecurities today announces an estimated $1.5bn project to work with local farmers, landowners, associations, co-operatives, and NGOs in the Cono-Sur region of Latin America.

Named Project Araucaria after one of the most endangered tree species in the region, this project will help design, finance, and develop nature-based carbon reduction and removal projects in Argentina, Chile, Paraguay and Uruguay, generating over 10 million tonnes of voluntary carbon credits each year.

Aggressive agricultural land use and conversion in Latin America now account for almost a third of global greenhouse gas emissions, and over half the deforestation in the world occurs. By working alongside people who own, farm, and support work on the land, Project Araucaria aims to reverse this trend by promoting the conservation and restoration of forests and implementing sustainable agricultural practices.

Ariel Perez, Partner at Hartree Partners, said:
“Reducing emissions is vital to halting devastating climate change; but it’s not enough. We also need to remove carbon that’s already in the atmosphere by restoring key habitats that have already been degraded and destroyed.

“Hartree’s project with ecosecurities will bring significant investment and expertise to farmers, agricultural producers, and landowners across Latin America by supporting their efforts to restore habitats and ecosystems, targeting the reduction and removal of carbon in the atmosphere by over 300 million tonnes.”

Ecosecurities, an impact-driven provider of environmental services with over two decades of experience in carbon emissions reduction and removal projects around the world, will use its on-the-ground presence in and knowledge of Latin America to engage farmers, producers, and landowners across the region. Ecosecurities aim to design and implement at least 20 projects and programmes.

Pablo Fernandez, CEO of ecosecurities, said:
“If we are to turn climate commitments into tangible action, we must develop solutions that deliver benefits for local people, nature and, as result, to the entire planet.

“This is why we are delighted to be partnering with Hartree to deliver Project Araucaria – a vitally important initiative that will promote sustainable production practices and, in turn, reduce global emissions.”

The portfolio aims to achieve certification under the Verified Carbon Standard (VCS) and receive Climate, Community and Biodiversity (CCB) status; it will be marketed by Vertree, a joint venture formed between Hartree Partners and sustainability leaders SYSTEMIQ.

Hartree Partners, a leading global energy and commodities trading company will invest, develop, manage, and market the projects, to help meet the surging demand for high quality Verified Emissions Reductions as businesses look to play their part in addressing the climate emergency.

Read Article
image of gas processing and storage

Gas pricing hits all-time high for UK in July and is set to rise

As July closes, the UK has seen gas prices reach record-breaking levels. The gas market…

As July closes, the UK has seen gas prices reach record-breaking levels. The gas market dynamics are constantly changing as different countries adapt their energy strategies to align with changes in demand and policy at national and international levels. The price of gas delivered in July was at a level never seen before and is reflective of the low storage levels of gas across Europe as we approach winter.

Previously the highest UK monthly outturn was in March 2013, where the month closed at 86.4 pence per therm (p/th), with the 2nd highest in December 2005 at 76.3p/th. July 2021 has closed at an unparalleled 90.6p/th, (as demonstrated in Graph 1 below), which will cause long term price increases at both business and domestic levels.

Gas pricing at National Balancing Point (NBP) since 2005
Graph 1: Gas pricing at National Balancing Point (NBP) since 2005. Data from National Grid and ICE.

Due to low storage levels, there is a risk that Europe won’t have enough gas to meet demand in a cold winter. Europe has lost a significant amount of domestic flexibility with less gas production coming from the North Sea and relies heavily on liquified natural gas (LNG) imports to boost available supply. With LNG demand high globally, Europe must compete with other markets for supply, supporting higher prices.

Graph 2: Year on year historic European Gas storage levels
Graph 2: Year on year historic European Gas storage levels. Data from GIE: Databases, Energy Operators, Commodity essentials.

In summer 2020, the market was well stocked with stored gas, as shown in Graph 2 above, so there were not the same shortages causing this year’s extreme pricing. However, this year, we have to compete with increasing Asian demand for LNG, causing gas to reach much higher price levels.

The shortage of gas was compounded by a late cold snap in April this year across Europe and a warm Asian summer. With unease around availability and apprehension of another cold winter, high prices indicate a fear there may not be enough gas to go around.

Will the price of gas continue to rise? Until there is a viable solution for the winter gas storage situation, prices are expected to remain high into the future, as demonstrated in Graph 3 below. The tightness could continue into next year if we finish the year with close to empty storage. With Nord Stream 2 nearing completion, there could be some easing of prices for European gas with more availability of gas flowing from Russia into Europe.

Historic UK power prices versus the market’s forward curve for 2021-22
Graph 3: Historic UK power prices versus the market’s forward curve for 2021-22 Data from ICE.

For Businesses, increasing energy costs are never easy to absorb. By looking at energy efficient strategies, optimising energy usage on-site and selecting a supply contract that can flex to the changing dynamics of the energy market, businesses can minimise some of this exposure. Customers’ bills are likely to rise upon their next renewal due to these market price rises.

Read Article